Sustainability
initiatives: How to
get big returns
without making big investments

Your real estate portfolio offers many opportunities to realize significant savings while reducing impact on the environment. Given that sustainable practices have become top of mind among investors, leaders, employers and even employees, now is the time to take action. But many organizations struggle with how to get started or take the next step. Here are answers to key questions holding them back.

Q: Are there quick hit opportunities to drive savings through sustainable initiatives?

Yes. Energy, for example, can account for 20% to 40% of overall facility costs. Even without an upfront investment, there are ways to conserve energy that can result in immediate cost savings and advance your sustainability goals. These simple steps can help you save money and reduce operational spend almost immediately:

• Adjusting heating and cooling zone control, temperature and pressure
• Updating equipment schedules to reflect reduced occupancy rates or hours
• Reviewing energy supply contracts to source potential adjustment opportunities

Q: How can I get an accurate assessment of the current state of our energy usage?

Energy audits can help you understand how your building and its systems are operating, which can help unlock savings opportunities. They can also help identify energy conservation measures. Auditors typically will help calculate the cost to implement these measures, determine the projected savings over time, and identify any incentives.

Different types of audits can uncover different types of savings opportunities:

1. Virtual audits include the remote review of energy and utility data to quickly identify opportunities to reduce costs. 
2. On-site audits allow engineers to conduct evaluations to identify operational efficiencies that can be implemented to deliver energy cost savings. These can also help to prioritize high-ROI, energy-saving capital improvements.
3. Retro-commissioning tests equipment to identify where it is underperforming in order to repair and return the equipment to peak performance standards.

Q: What’s the best way to prioritize my capital investments in sustainability with a limited budget?

Evaluate investments using metrics that matter most

When evaluating sustainability initiatives that require an up-front investment, always be sure you have a complete and accurate understanding of the expected ROI.

While some organizations exclusively look at payback period for evaluating capital investments, the sole use of that metric can compromise smart decision making. For those who own their own buildings or have long-term leases, it’s likely their finance teams are focused on the internal rate of return (IRR) for capital investments, which is a forward-looking metric that calculates an investment’s potential return over its lifespan.

For example, an LED retrofit project that requires a capital investment of $200,000 with an anticipated four-year payback period might be get pushed down the priority list in favor of projects with a shorter return period. But with a lifespan of 10 years, that initial $200,000 investment provides an annual savings of $50,000. In the end, that $500,000 in total savings equals an IRR greater than 20%, exceeding most companies’ hurdle rates. Therefore, using lifespan as the metric gives a more accurate picture of return on investment.

Look for investments that can generate revenue

Organizations that have title to their property can use the asset to generate income. Investors are more interested than ever in funding sustainable infrastructure projects, providing owners with an opportunity to create new revenue streams.

Case in point: the Washington Metropolitan Area Transit Authority (WMATA), which operates the nation’s second-busiest rapid transit system. The agency made a 25-year agreement with SunPower and Goldman Sachs Renewable Power (GSRP) to host a solar power installation, monetizing assets they already own. SunPower built solar panel carports or canopies over parking lots and garages at four Metrorail stations to generate power for nearby communities. GSRP owns the system and provides annual lease payments to Metro for up to 25 years, providing WMATA a $50 million revenue stream that also significantly advances its regional clean energy goals, including the Clean Energy DC Act.

Consider the impact on employee experience

Sustainability can be a key to creating an experience for employees that supports their health and wellbeing. According to a study in the journal Building and Environment, occupants of green-certified, high-performing buildings show greater cognitive function in the areas of crisis response (73% higher scores), gearing decision-making toward overall goals (44%), focused activity level (38%) and strategy (31%). They also slept better at home and reported fewer symptoms of illness. All of these benefits reduce the amount of time and money lost from workers who aren’t feeling or performing their best.

Learn more

Visit our website to learn more about how to accelerate your organization’s journey to become a more sustainable, more resilient, more responsible enterprise.

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